Bill and terry are considering buying a house and need to figure out what they can afford and what a bank will lend them. their adjusted gross income is $166,988. their monthly mortgage payment for the house they want would be $1,544. their annual property taxes would be $9,888, and the homeowner's insurance premium would cost them $1,007 per year. they have $510 per month car loan, and their average monthly credit card bill is $5,100. would the bank lend them $210,000 to purchase their house? explain with work.

No, he bank will not lend them the loan of $210,000 because the back end ratio of Bill and terry is greater than 36% i.e. 58%. and bank only lend money to those who have back end ratio less than 36%

Step-by-step explanation:

The bank will lend them money if their back end ratio is less than 36 %

back end ratio= Total Monthly expense / Monthly gross income

in the question we have yearly insurance, so convert it into monthly cost i.e

Monthly insurance = $1007 / 12

                               = $ 83.91 =~ 84

similarly the property tax is also given yearly, convert them into monthly

Monthly property tax =  $9,888 / 12

                                   = $ 824

Now,

Total Monthly expense = monthly mortgage payment + Monthly property tax + Monthly insurance + Monthly car loan + monthly credit card bill

                                      = $1,544 +  $ 824  + $ 84 + + $510 + $5,100

                                      = $ 8062

Monthly gross income = $166,988 / 12

                                     = $ 13916

back end ratio= Total Monthly expense / Monthly gross income

                        = $ 8062 / $ 13916

                        = 0.579 =0.58

So, Bill and terry back end ratio is: 0.58 *100 = 58%

The back end ratio of Bill and terry is greater than 36% i.e. 58% so the bank will not lend them the loan of $210,000.

1. 3.4/4

2. 0.8/7

3. 0.5 x 3

4. 0.9 x 6

5. 10.8

6. 2.35

7. 0.567

8. 9.35

9. 0.02

10. 0.06

11. 0.16

12. 0.42

13. 0.63

14. 5.6

15. 8.1

16. 9.9

17. 0.28

18. 0.48

19. 0.27

20. 0.49

21. 0.45

22. 0.72

23. 0.9

24. 0.88

25. 0.75

26. 0.16

27. 0.328

28. 0.495

29. 0.72

30. 1.068